ZIMV - Earnings call transcript Q2 2022

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Operator

Good day and thank you for standing by. Welcome to the ZimVie’s Second Quarter 2022 Earnings Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Marissa Bych, Investor Relations. Please go ahead.

Marissa Bych

all today’s you thank and for call. joining Hi results quarter ended today, ZimVie XX, the financial released Earlier June for XXXX. well A is copy sec.gov. as available release as on the of company’s website the press zimvie.com

XXXX like we these this and to differ XX-K a statements a during include Form materially to Before those that the Please I’d remind that refer by make discussion call results management Actual detailed statements. SEC risks risks due indicated subsequent variety uncertainties. filings uncertainties. you to forward-looking from and of comments will may company’s and forward-looking begin, the for of

the Additionally, Reconciliations release deck investor today this of call call directly website, and/or on found the to issued Investor information Relations conference as This on measures company’s include contains within the is the most discussion time-sensitive measures certain section and earnings measures. these only zimvie.com. financial of comparable the non-GAAP financial GAAP the will included accurate live the broadcast required by of of events And as Vafa ZimVie. I ZimVie financial revise information, update or of whether intention to President projections Executive to turn new with except today, any any Chief otherwise. because XXXX. the will Officer future forward-looking obligation, law, call statements, or August over or XX, or Jamali, that, disclaims and are

Vafa Jamali

then a independent technology ZimVie quarter to Officer. billion June and global opportunity with to ZimVie, like spine XX, I’m life leader call those investors and reviewing today the are is patients, for I’d participate as quarter at across joining market a off the with a by our on XXXX, for in medical and our we ended first and performance spine dental markets. afternoon restoring $XX including us. Good dental dedicated global full company. Heppenstall, Chief newly you our and we all Financial for thank our businesses, who Rich our reacquainting kick call financial

the in number worldwide player in largest spine. five number the six and dental are We market

XX over and brands have and X,XXX clinicians in approximately plus countries trusted We operate have We we members. XX by surgeons worldwide. team

that healthier Our everyone is vision to stronger. feel and deserves better,

to clinical life. daily restoring Our technology foundation advance mission is to

leading As the substantial I markets. two being growing and a mentioned we in fortune player of have earlier,

Our broad patient are markets solutions substantially set a product platforms across in address those critical from cases. needs of differentiated and several competitive

support sustainability; and time support three its technology and across dentistry. as the dentistry derivatively office while that spends Our and largest dental in implant digital solutions, biomaterials clinician our dental we the is patient improves a reducing including Within chair. emerging the Digital dental is the which implant in segment, durability positioned growing quality and this in implant, an business implant well provides key to very which market. the continue to global categories: biomaterials, the workflow contributor; both of their significant operate the

Emergence modest stability TX the at to for patients. receiving PRO traction recognized Encode experience have implant early reception products centered feedback and care restorative our with significant both seating and the favorable pull-through the second dentists Healing ZimVie’s on As Emergence the and and Emergence dentistry TX PRO Abutment primary optimize aesthetics. PRO need strong positive Both of products on tissue to data, scale adoption PRO our and capturing we optimized and level, enhanced early highlight also I implant reflect an Encode we recent the and solutions, eliminating quarter, Tapered previous the are profiling. strong Implant promised Encode am pleased digital ease launch bone of premium implant to Both see designed TX innovation In the of to TX we especially in share on Based segment. use our business. driving market and for

healing implants, solutions. instruments comprises Our broad business as of spine bone the biologics well portfolio Spine and as

Motion spine In complex two and an we and remain emerging Invasive of have Preservation actively to also very Surgery. market-leading novel we Invasive leading and disc Surgery, Mobi-C, our Devices, is addition categories, treatment enabling we replacement The Minimally segment Motion to largest exciting Preservation cervical scoliosis. including expand. benefits addition Tether solutions, exposure further Minimally technology, area an pediatric a core area and for about, which the to from the intend are in is which excited of typically

for recent Anthem The Regarding of Blue our excited highlight decision from Cross members within plus to I the indicated policy which XX to or am body solutions, potential anterior for positive treatment patients expands under covered Blue receipt ABBT eligibility million Tether our Motion Preservation device, vertebra tethering a Anthem Shield.

positive firsthand on optimistic and that for Tether’s pave we’re favorable will policy to their the changes that therapy decision this families, lives We have children and expanding access. way The continue the had seen the impact of additional

we at an Turning sales as quarter as a recognized very in million the to days offering our on exit we like baseline we currency but roughly performance against year-over-year confident company, are grow first ZimVie. declining to $XXX.X announce to can am X% I we net remains second Nonetheless, independent time. full pleased early the reiterate would for quarter, basis, that it total the constant I over

some in of also facility peers elective many which Our the the our were results some nature have damage quarter shortage staffing extent impacted to in of procedures, our the stated. of by and

growth. However, to our challenging we a from positioning future macro drive on and environment foundation detract our focus not allowing to strengthening are

the PRO markets the launching products I cadence coming Emergence Abutment, a digital Encode referred in product over of forefront stay the For to delivering at Dental, year implant TX dental and beyond. Healing which we new intend to earlier, by example, enhancements by and energy the of two premium the

as we our value on in team’s we Anthem, expect positive the saw to $XXX portfolio quarter quarter and today, touched million first with a end time. awareness smaller past, improved The highlight greatest by also closing spine grow of The of scoliosis improves adoption second June would work over insurance although access million like The from of We in scrutiny through balance will proven piece from coverage balance approximately the contributes Tether culmination meaningfully we sequentially cash flow a the As monetization through Tether certain years shortly. cash of our Rich spending earlier, and of fiscal improvement to that sheet, I in of form headwind has the as I cash policy equivalents. our pediatric detail drove to Tether’s decision including our discipline, aspects $XX and driving end, of in greater

efficiency we cash over year, we Day our business, this are our to our As flow improving during Analyst/Investor advancing said reducing leverage operational time. of including earlier committed and

progress increase cash, greater to goals. those line more quarter to forward early of will the our our Chief with confidence in Officer, review flexibility providing over I and Heppenstall, pleased Financial to are second our performance We hand financial achieving details and outlook. now Rich

Rich Heppenstall

XXX an sales the second by Strong sales X.X% $XXX.X by year net net a X.X% Shifting second and basis a implant Thanks of in total for impact million reported our reviewing our a third-party biomaterials X.X%. of growth a in from in decreased in gross selling additional when currency. Adjusted year X.X% for on $XX.X were excess fueled dentistry dental’s Adjusted in million is primarily by up higher decrease in net XXXX. we’ll a sales due inventory stand of versus double-digit offerings percentage of operational and currency medical X.X% continued increase basis XX.X% of to reported reported timing as a taking million to our sales Outside Global on to of period. $XX.X on sales currency for excluding part sales, expenses to drives decrease in period. of brand of of day, percentage lower representing research in providing by XX.X% XX.X% the was period, Biomet the then markets $XXX.X and certain of reduce is a reported selling, and Zimmer quarter to were to the on XXXX XXXX, third-party The development flat Global over structure. compared constant XXXX in the initiatives the by segments, a certain administrative in QX Adjusted retained intended third-party margins more two $XXX.X sales the prior third-party lower XXX with of sales of general or Europe. our prior but XXX When third-party was The growth. sales, of million a a the an $XXX.X on of by points increased a foreign to year-over-year. prior a QX full to basis EBITDA decline cost constant is XX.X% increased one our expenses spine XXXX, as environment and our net partially net or adjusting when $XX.X decrease Vafa G&A and sales XX.X% reflects of market. basis the cost decreased macroeconomic period. when decline prior our less was outside a compared driven million of company margin points XXXX, increased decrease constant million million, net reflects and U.S., outlook digital year of the year year net compared prior to results, of due to gross to basis, activities sales basis dentistry into the expenses variable $XX.X begin prior the programs, XX.X%, $XXX.X profit and and pull-through million our of the denominated sales selling period. net Dental sales. challenging good Adjusted net and respectively. was In the and overshadowed we period. when U.S. and basis consideration from in sales education unprofitable million the but the reduction independent which extra pressures primarily reported compared period. close third-party commentary leveraging by year and by afternoon to our rationalization of XX.X% prior decrease spine partially sales program, in offset X.X% compared adjusted offset basis a XX.X% XX.X% the of year quarter XX.X% by XX.X% is higher ZimVie quarter X.X% constant a by net and as discontinuation public Adjusted million as in late continue EBITDA $XXX.X markets items gross higher year spine, third-party sales constant sales, currency currency, million when everyone. due headwinds, The and Geographically, particularly exchange obsolete the selling decrease in the spine a day were prior in second of $XX.X exit contribution in or currency driven U.S. of delays sales segment and margin points was implant from separation growth a spine decrease products of I’ll and on U.S., implants currency from of impact to by by until year in euro. Beginning XXXX. of complete third-party digital competitive these year-over-year mainly

which against Our the to fluctuations, profit currency seeing margins in are volatility currency are the global we generally naturally markets. hedged meets

Adjusted reflected weighted risk. way instituted QX $X.XX making modest addition, as of income following immediately currency average gains million per their diluted $X.X to fully XXXX. transaction designed, working in a hedging we into XX.X million program count statement a a program is on of This our hedge share the balance at was In share sheet currency against earnings spend shares. by

to it increase and optimizing During on sold. to realized on part in of a stages allocation due the adjusted are a tax previously assets liquidity, on working we capital in of flexibility. basis capital an the balance financial share focus Touching the recognized we of strength million account intercompany we of to monetization approximately the drive benefit as or of Zimmer is thus inventory This per and nontaxable inventory for when were the of and tax capitalizing on part income on early large Biomet. cash $X.XX certain $X.X quarter, for our is assets with sheet ZimVie

This includes with parent foreign prior approximately up at revising $XXX and million full $XX.X quarter amount sales net range headwinds, capital now on we Inclusive year XXXX of to of of efforts $XXX of settle of early XXXX cash $XX inventory million. $XXX and full second to half headwinds to to a certain our our outlook ERP I’ll billion instruments. planned a company. greater-than-anticipated and equivalents $XX million exchange at since million from reduction This have a our than of net XXXX $X.X the spine December We to to Our resulted post-spin-related turn in year spent are in ended XXXX. $XX million million outlook. the transactions total fund a earmarked of rates. reduction $XXX $X.X exchange in to decouple million of our March million impact of from approximately net million implementations of prevailing due prior slightly or is guidance reduction in compares our less sales. to Over revised foreign cash

Europe. of due This As it expectations Dental net we prior sales constant end the now mid our headwinds, digits in for particularly single-digit macroeconomic relates high in growth business. currency segments, XXXX at for our mid-single a to to to expect year the growth basis lower on full the is

sales now decline versus due expectation to procurement double procedural and volume-based high single decline prior from execution challenges. to our Spine we mid segment, XXXX full the in The volumes, digits. year our acceleration choppiness commercial low For China net to XXXX, expect into digits in is

We against to our this initiatives execute made longer-term and return progress growth. our continue inconsistencies team’s identifying in commercial to have approach business to

to we our pleased actions our months optimize Thus, to XX.X% few EBITDA taken with spin our and first adjusted are operational maintaining of XX.X%. have structure. the are we in the business since range margin cost We right-size

per line of $X.XX full adjusted share revising per $X to Turning $X.XX XXXX year share share expectations, to bottom our are from we to our a to per outlook range offset $X.XX the is large in previously. of and the part the expense, to year lower impact impact QX. in we partially revenue higher of interest benefit by due full This tax earnings realized

rationalize spin hand operational to that strength number rightsize and estate to want since in sheet. back operating expenses, to close footprint our to X and our on of I of months the initiatives control real underscore and assets over our were business, launch I Vafa Before the balance geographic we monetize a

are Although of statement the will manifest and we flexibility, in income an benefit as over many just discussed. immediate seeing these I of the projects realization quarters liquidity themselves to financial coming

apply we We our turn to time Vafa. operationalize we over will progress spin continue are in our short and With to as I’ll financial to now the since with the pleased continue disciplined back that, the business. framework call

Vafa Jamali

Blue positive Anthem call covered eligibility from Rich. back I treatment to Tether, to plus XX by Shield Shield. expanding want our The for you, Thank within their potential looping decision under Crafter close million the policy Blue Cross members Anthem Blue

coverage scoliosis scoliosis original Hospital received and approval safety of device barrier to Tether Children’s VBT, X,XXX its anterior U.S. patient have is I and treatment kind tethering. device to scoliosis doctors Colorado HDE old FDA-approved HDE, appeal based for therapy, were Our non-fusion and validating although the since with body XX-year in on August exemption, the its story X of humanitarian Over clinical granted whom a device first XX was children the male recommended only the want over in years with Its first The correction. at for procedure. the Tether his of claim effectiveness vertebral was Today, and approximately denied. highlight XXXX surgeons performing prior the data

As worsened, family his the out fight his to scoliosis spent this. phone on

necessary for medically procedure set even coverage In decision what With Just the transform best policy that, we any family the that foundation patients time updated This like to thank Anthem’s their from leverage for over greater the to therapies way the that X up few company ago, significant be deemed in and patients’ They removes doing of pleased insurers we will and questions. additional with time to pave the this therapy were barrier Expanded due spin and are our operate your lay one, to to summary, as son. the is just insurance are our a for for access do open patients. time. a lives. the ago, for treatment it our from got many would we the months optimistic to priority mission cover The Tether to growth. like which for treatment to our thrilled continue future we the weeks differentiated word I efficiency greater option you for want remains indicated

Operator

Thank you.

Our Marcus. from first moment. Robbie question One comes

Robbie Marcus

okay? Hi, can you hear me,

Vafa Jamali

Yes. Robbie, ahead. go

Robbie Marcus

this, taking what’s to the the underlying in a now assumed Great. Maybe FX of currency range, questions. what’s in what assuming performance? we and just Thanks for better prior for we so just sense start, guidance here, have so of what’s could guidance headwind get a were framework you currency the

Vafa Jamali

to to afternoon Yes. again. good you Hi. talk Good It’s Robbie.

guidance the close the $X over February, when headwind. was original year. or million the rates basically range estimate are now the end provided in at we the with seeing at euro we seeing So, What of parity, are we to billion the right the prevailing point of $XX FX

dental the our recall, half outside you As U.S. is business of almost

And seeing guidance in so FX million the revision. of over we are $XX headwind

Robbie Marcus

Got it.

there a biggest like third recovery? about So, here should in guidance I relative there second quarter. a think shortfall follow-ups the fourth looks we few in where to points quarter And more How after pressure is assumed shortfall It in was that. quarter. Thanks. What’s are? market the have and assumed

Vafa Jamali

Yes.

a color I just spine. about thinking on dental balance will are up bit So, between of and little how we of the me break let the provide and it year,

mid-single digits. on digits dental the high-single business, So, guided to we

our be And dental, quarter. to to in seasonality XXXX. it The of what way is if We lower think modest the to for expect end our and due dental seasonality in decline the sequentially so kind QX be as say, a largely is will same QX strongest range. we typically roughly a was, it the QX then lower is for is and see expect I at about of quarter

things, side the in the but still is be expect of of QX we digit expect two decline. quarters the of remaining because low-single balance the impacted be we by spine the in year seasonality, of spine. stronger Again, seasonality to On to the QX

Robbie Marcus

Got you good expense had me it. is for news is, good the control… Last

Vafa Jamali

Robbie, sorry interrupt. to

I said meant digit, I low-single low-double think my I decline, digit fault.

Robbie Marcus

it. Got

Okay. good seeing savings? helps. you control where Maybe margin variable holding from coming cost That pretty your it limiting and have and Good expense are to line just you targets the quarter, Are you are holding cutting reallocating Is is here. the in the really speak was comp? Thanks. drive spend to helped been spend on would you projects? top more line? you that back Are or news cost you are are tight spend,

Vafa Jamali

fixed Hi Yes, Robbie. a spine, here. the the center we good wanted number was company, to We a of where so money when It’s at we distribution we operations, the look were within of obstacles and said we Vafa we have we one that in didn’t that. overcome. operations. lot And and had performance, primarily DC, wasting just very

on that So, haven’t on, we what really done and we by duplicating early have spending that but been prudent in projects. levels savings have we spend weren’t really, we was summer, a to But were we there. wanted, on basically been that back we service sacrifice sense any to

looks that one? as been on think get – on areas have. other we what commercial particularly where we we that on guys expense and going and I expect granular – can we projects. our we you haven’t that to have the doing pipeline later really you to we forward we done what any have we are activities kind any really on that of So, little of a spend thoughts forward pipeline on on, And save Rich, sharing But more looking certain am the but commercial are there. are I well good. with on

Rich Heppenstall

quarter really footprint, real things, initiatives need, mean Robbie, don’t. I to and we also number global how estate some actually we our much second took do including much our looking at how in a rationalizing the of Yes. determining we

a to steps and bit. flatten businesses the some organization took also We right-size the little structure

business in part as also we of for waste. take looking mentioned before, there to of and And out And a QX. the really to operationalize so we that’s lot look are

turn to areas rocks, And are we are continuing so finding inefficiency. we over as of

just we best are along sure to and – of them through our make making. the that same that kind investments are we lens have the we scrutinizing getting putting And all money return the are just are on so that out we spending we are we of really what

Robbie Marcus

Great. last And just for me.

X.X the light seen of you these far difficult moved of trends are months points any these signs quarter. Have have of end over so since We the of month, a about up? X any lot. improve summer, loosening some pressure Thanks second that

Vafa Jamali

Sure.

progress we made. internally are operational some these have So, some we continuing of make speaking, against gains to

think you theme. continue see will I So, that to

But has the But extended to good we on not it. U.S., good are summer the a a think not go good being that’s better of seeing reason. outside vacation loss the when which for customer, back I slow think absentee especially and we I has thing. your lack very largely the been the question, an a the of we outside don’t is explain why year. do So, of conservative Macroeconomic, visit U.S. a the we we and necessarily vacations But slow, a think summer the of to of is I of I customers, a seeing believe we are customer been into half crux are that’s The seeing pretty for way are see, U.S. market.

that see else on being that Rich, and the through the will something anything I think. I you So, carry rest of year. FX see

Rich Heppenstall

I No, think that’s fair.

I mentioned fine. think you it

Robbie Marcus

lot. a Thanks Great.

Vafa Jamali

Robbie. Thanks

Operator

the Thank any there queue. management closing no are I back would for to questions in you. call other And the turn like to remarks.

Vafa Jamali

for Thank the questions. Robbie joining interest. much thanks you for the call. Appreciate your very

we see again, a optimistic stages, well-operated ultimately and really rich are we things pipeline robust the feel create path the about business. feeling well a as to a we are are It’s turnarounds early and in bumpy, but company. like and We as

we for very you in a to much forward to talking you thank quarter. your and look time So,

Operator

We call. conference today’s concludes you This for thank participating.

You may now disconnect.

ZimVie (ZIMV) 11 Aug 222022 Q2 Earnings call transcript